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In this paper, I will first develop a brief history of El Salvador. Next, I will describe the political situation in El Salvador and its relation to American political assistance during the 1980s war against the Marxist rebels. In the third section, I will analyze El Salvador's economy and American economic aid and show how it supported the counterinsurgency. I will then discuss the military situation in El Salvador and American military support in defeating the Marxist rebels. I will offer some concluding remarks showing how the Reagan policy helped to form a successful outcome to the war against the insurgents. Finally, I will analyze the lessons from the war in El Salvador and apply them to today's war on terrorism.